Posted by & filed under Accelerator, Fintech, Nordea, Technology.

Feelingstream was part of our first Nordea accelerator last year. They are currently working on 4 paid pilots, and are also well in their way of conquering the banking industry. They continued working with Nordea after the accelerator program, and now that collaboration has taken a big step forward: Feelingstream and Nordea have just signed a big deal. Soon they’ll start a live pilot together. Click to tweet about it!

Nordea Group CEO Casper von Koskull with Terje Ennomäe innovating the future of bankingBig companies get a massive amount of messages every hour. It is hard if not even impossible to figure out which of them need immediate attention and which of them can be dealt with a bit later. That means lots of lost potential and angry customers; things that companies just cannot afford anymore. New competitors pop up every day, and having the best customer experience is more important now than ever. It is a huge problem for companies, but maybe not for long.

Feelingstream has created a machine that understands the actual content of text, and then uses that knowledge to organize inquiries from urgent to less urgent. This means critical issues can be found and dealt with much faster. And that of course, means much better customer service and no lost sales potential. For employees, it doesn’t mean any extra work as Feelinsgstream’s solution is invisible in the companies’ systems.

Feelingstream sees great potential in the banking industry. That’s why working with Nordea has been agreat experience for them. Fitting the startup way of doing thing into the highly regulated banking industry hasn’t always been a breeze, but they say it has been all worth it. They have not only gotten an invaluable reference from Nordea, but also the knowledge of what is required to succeed in the industry.

“Having Nordea as a reference is an incredible advantage considering our target markets. We have also gotten market access and been able to work with real data and situations, which is the most important thing for startups!” says Terje Ennomäe, the co-founder of Feelingstream.

Feelingstream has a lot of cool things ahead of them, and we can’t wait to see what kind of superstars they will become!

Posted by & filed under Accelerator, Nordea, Startups.

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This is a guest post by Levon Brutyan from Collectly, Inc.

Collectly is one of our portfolio startups (Collectly.co). Collectly helps banks and businesses minimize losses on bad debts while keeping the customers loyal.They are part of the second Nordea and Nestholma Startup Accelerator batch. Originally posted here.

Collectly is a web application that helps all types of lenders ease and maximize bad debt recovery with few clicks. The tool utilizes deep learning algorithms that help resolve one of the biggest problems in debt collection industry (Read here) and return more money to the lenders.

Today I will share with you what is Nordea Bank Accelerator about and why it gives us a value comparable with the one non-fintech startup become from YC or 500 Startups. Currently, we have survived 1 month of the program and I believe that makes sense to kinda share our experience with you.

By the way, for those of you who don’t know what is Nordea Bank, please see this. Simply put, Nordea is the largest bank in Scandinavia and one of the largest banks in Europe.

(a) How to get in?

Getting into Nordea Accelerator was a long, challenging, but a rewarding experience for us. The application process starts with F6S and is pretty straightforward (comparing to the one of YC, e.g.). After about two month of waiting we got the invite to participate in the Training & Selection week. Considering the fact we got accepted into Plug’n’Play FinTech, StartupboothCamp and Fintech Innovation Lab we were a bit surprised with not just being invited to one-time interview but a whole week of training and selection. The good things about this week were: traveling to the beautiful Oslo, Norway and actually getting reimbursed for the tickets and lodging ($1,800).

We have compared the values that might give us all of 4 accelerators and for rational reasons we’ve picked up, thinking of Nordea Accelerator not only as an accelerator, but more as as an access to Nordea Bank as a customer/partner. Nordea Accelerator looks for promising startups all over the world in fintech or any other industry that might be strategically aligned to the business of Nordea (you have to think about it in advance). For instance, in our batch we have three different startups that do insurance (Fjuul, D-Vision, and Tickkr) or even some HR related startups that might be beneficial internally for Nordea. Important to mention Nordea Bank acquired two startups right away from the previous batch.

So, the requirements are simple: great team, bank related business, promising business model, traction (non paying customers do count). Well, there are some startups that didn’t have any traction and were invited to the Selection Week, but they still have tested their technology somehow.

Selection Week

The Training & Selection week is a short, but very intensive MEA-kinda (Master of Entrepreneurial Arts:))) experience mentored by a great, brutal, and very experienced entrepreneur Antti Kosunen and his amazing VC Nestholma team. I guess the Selection Week deserves a separate post, but here what we have done during it: showcasing our products, business models, working on lean canvases, talking to customers, talking to real VPs of Nordea (many of them like almost 15–20), and of course pitching, pitching, pitching. I believe we’ve been tested by both Nordea and VC Nestholma not only how good we are as entrepreneurs, but also how good we can sell, and how likely Nordea Bank can be interested in doing business with you.

At the end of the Selection Week from about 35 different startups 12 have been selected and offered to sign a standard convertible notes non-negotiable (I personally think depends on your stage) agreement to get a funding of EUR 12K in exchange of 4% of equity. You will say, WTF?!? Only EUR 12K?!??! Yes, and I’ll tell it’s really worth it in case banks are your strategical partner/customer/channel/supplier. It’s really one of the most smartest 12K I’ve seen so far.

(b) The structure of Nordea Accelerator

Nordea Accelerator is a separate entity of Nordea Bank (at least seems to be). All the investments are done by VC Nestholma. Most of the sessions, learnings, contacts are provided also by VC Nestholma that is a partner of Nordea Accelerator. The guys at both Nestholma and Nordea Accelerator are very friendly, helpful, and brutal to startups. They will provide you with powerful connections inside and outside the Nordea Bank, but limited to Nordic region (that’s definitely a downside for some of the startups).

(c) Nordea Bank as a customer/partner (APIs, data)

As a customer: I believe, Nordea Accelerator is the best way to validate your business model and actually get a pilot with Nordea Bank. I do believe, from every batch about 4–6 startup will get their pilots, sooner or later. The fastest you can do is 1 month.

As a partner: Here the things become a bit harder. The majority of startups need some kind of integration and especially the data. Nordea Bank has started the program of Open Innovation and it’s actively developing its APIs, but as of today almost no kind of APIs are accessible from the outside.

In case you want to distribute you services to 300K of corporate customers that Nordea is servicing it’s possible, but of course you have to find a viable win-win model for both you and the bank.

(d) Routine

I personally haven’t participated in neither YC or 500 Startups programs, but as I do have a lot of friends who participated in either of the programs and based on their opinions I can imply Nordea Acceleration program is closer to what 500 Startups offers nowadays. There will be a lot of lectures, workshops, team work, mentoring, i.e. learning. The program is an ideal fit for the teams that don’t have any kind of entrepreneurial experience, a good fit for the teams that still struggle with the product-market fit, and still somewhat useful for already experienced team that grow rapidly.

(e) Location & Facilities

Nordea Accelerators runs the program simultaneously in both cities: Helsinki, Finland and Stockholm, Sweden. Helsinki has a lower living costs (what is really nice, considering EUR 12K, which are enough for 2 members for the whole program), great office, many conference rooms, working desks etc. Stockholm is definitely the most beautiful city among the Nordic countries, but with a higher living costs (still way cheaper than SanFran or NY). It also has a great office (not as fancy as Helsinki) and amazing places bars, cafes, restaurants (relax, you won’t have time for that (ha-ha-ha)).

1st Month Conclusion

Collectly is a pure fintech startup that utilizes deep learning algorithms, aka AI, and is definitely b2b focused one. The first month of the Nordea Accelerator was amazingly efficient for us. I can’t share any results with you, because they’re confidential, however I can assure without this particular accelerator we would never achieve any of the goals in that amount of time.

So, guys, go to http://nordeaaccelerator.com follow the page and mark your calendar whenever the application period opens again. Oh, yeah, and definitely wait for the second report on the accelerator in a month:)

Levon Brutyan CEO/Co-founder Collectly, Inc.

Posted by & filed under Entrepreneurship, General.

Entrepreneurship is being hailed as the key to economic growth in the future. It has become an acceptable or even a somewhat glorious way of making a living. Still, our view on entrepreneurship is out-dated and one-sided. With that we’re leaving too many opportunities on the table. To attract even more people to become entrepreneurs, we should widen our perspective. We should talk more about it also as a practical way to achieve your goals rather than just as a goal in itself.

entrepreneurship is a toolThe World Bank and European Commission see entrepreneurship as the way spur economic growth. Everyone loves to hear about the superstar entrepreneurs like Elon Musk and Richard Branson and how they’ve changed the world through entrepreneurship. Especially in the world of the high growth startups, serial entrepreneurship has become the way to do it: grow fast, make an exit and start again. And it is important have the serial entrepreneurs, because you certainly come out of each experience with a lot of new learnings. The accumulated learnings of the serial entrepreneurs are an importan part of the impact entrepreneurship has on the growth. But we need to look beyond these popular views.

Two faces of entrepreneurship

For some of us entrepreneurship itself is important. The ideas and business may change over time, but being an entrepreneur and working for yourself is an important part of working. As Niklas Zennstrom said

If you want to be an entrepreneur, it’s not a job, it’s a lifestyle. It defines you.
Niklas Zennstrom, the Skype co-founder and VC

For others entrepreneurship is just one of the tools in the toolbox. You pick it up, if it helps you to achieve your goals. Still, you are just as happy to work for someone else if that enables you to achieve what you want. Just like Matt Rogers said:

I never wanted to be an entrepreneur. I wanted to build things that are easy to use.
Matt Rogers, Founder and VP of Engineering at Nest (acq. by Google)

Even serial entrepreneur and Twitter co-founder Jack Dorsey has said that he never wanted to be an entrepreneur.

We need to embrace the a broader view of entrepreneurship

Over last year, I’ve worked with hundreds of early stage startup founders and others who have been considering entrepreneurship. For many it seems to be a really scary choice. There are already lots of un-necessary hurdles for people who consider entrepreneurship, including all kinds hurdles in legal issues and taxation. On top of that, the one-sided view makes people think that entrepreneurship is the final choice for the rest of your life. Switching back to some other form of working is too many times seen as a failure. This prevents many people from pursuing great business ideas by using entrepreneurship as a tool.

I think we have a much bigger opportunity in entrepreneurship than we’re thinking. Yes, regardless of our definition, it requires a lot. “The reality is years of hard work, throughout which you usually have no idea if you’re even moving in the right direction.” as Facebook co-founder Dustin Moskovitz has said. Still, it can be a really useful tool – not a goal in itself. It enables many more people to achieve their dreams, make a living, make an impact in the word or whatever it may mean for each of us.

Topi Järvinen, @topij

 

Posted by & filed under General, Press release.

We are excited to welcome Mika Eriksson to our Nestholma family! He has a strong background in entrepreneurship, sales and all things international, and thus couldn’t be better addition to our team.

Mika Eriksson joins NestholmaMika has been an entrepreneur for 18 years and cofounded 4 companies. He also worked almost 8 years at Finpro (Finpro is the national trade, internationalization and investment development organization in Finland), where he helped countless startups and corporation succeed in variety of fields. Both his own companies and his work at Finpro has been very international. At Nestholma he is going put his international knowledge and vast sales experience to good use, as he will be focusing on our international growth.

”Nestholma is doing an amazing job giving big corporations a big gush of innovative air, and at the same time helping startups benefit from the vast knowledge and experience corporations have. Nestholma is also growing internationally fast, which makes joining the team even more exciting”, says Mika.

Look forward to even more global Nestholma!

 

Posted by & filed under Fintech, Funding, Press release, Startups.

During the past couple of years Nestholma has invested into 15 Fintech startups, which is more than any other investor in Finland. The company is also one of the most international investors in Finland. Nestholma has invested in startups from Finland, Sweden, Norway, Denmark, USA, Germany, UK and Estonia among others. These startups have participated in the Fintech accelerators Nestholma has organized together with Nordea Bank.

”Fintech is going through big changes. We have a great partner in Nordea, and together we are able to find the startups that have a real potential to succeed in the industry,” says Antti Kosunen, co-founder of Nestholma.

Currently, 35% of Nestholma’s investments have been made into Fintech startups. Fintech will be also a strong focus area in the future in the Nestholma investment portfolio.

More information:
Antti Kosunen
Co-Founder
Nestholma Oy
antti (at) nestholma.com
+358 400 850200

 

 

 

Posted by & filed under Corporations, Customers, General, Product development, Startups.

If you’ve dealt with both, you know that startups and big companies behave very differently. You can hear all sort of stories, from people moving from a corporate job to a startup, to entrepreneurs trying to deal with their corporate customers, to the same corporations trying to make business with startups.

What’s considered best practice in startups or in corporations is dramatically different… sometimes contradictory! And all those best practices make sense if you understand the context in which each one of them operates. In this post I try to make sense of the biggest differences between the two:

 StartupsCorporations
ValueCUSTOMER
They are normally on a quest to solve some big problem from their customers. Something is good if it increases that impact — and turns it into a good business. They make quick prototypes or MVPs to show it to customers, to decide about changes.
PRODUCTIVITY
To beat competition, they need to focus on productivity. They need to be efficient: get the best impact with the least resources. They work with budgets to understand how the company spends. They might calculate the Return on Investment to decide about changes.
Product DevelopmentDIALOGUE
They develop the minimum version of their product —focusing on the core — and show it to customers (a few of them, the early adopters) as soon as it’s possible — sometimes before. Based on customer feedback, they take the next steps.
STUDIES
Investing at the beginning of the product development project makes better products. They normally invest resources in market studies to understand demographics and big market niches. They develop requirements to coordinate big teams.
DecisionsTEST
Everything is uncertain around them, the only way to find out and decide is to test. Data in consulted, but intuition and gut feeling play a big role in decision making. Decisions are kept small and validated with customers.
ANALYSIS
In big companies, there is much at stake. In-house experts exist and are consulted for decisions. Many people are involved in the decisions. Effects are measured and tracked, and the decision process is as rational as possible.
PaceFAST
The most precious resource for startups is time. They have limited runway — the time until they run out of resources — and they have to be quick to figure out a good business model. The shorter the iteration the better: they focus on speed rather than fine tuning.
STEADY
Predictability and control are seen as positive. Coordinating is difficult, because of the size of the company. Changes might impact many people, who might have their own agendas. It’s important to limit the uncertainty in decisions and changes, and because of that, they take a long time.
Way of workingGET-IT-DONE
Startups have small teams that are not very hierarchical. People tend to be a jack-of-all-trades with some specialisation. Everybody learns a bit about everything since there are no in-house experts. The way of doing things is mostly defined ad-hoc.
PROCESSES
People and departments have clear roles and responsibilities. Most of the activities have clear processes that have been optimised. This creates clarity and uniformity in the quality, but can also create bureaucracy. Everyday tasks work well and are predictable.
CommunicationTRANSPARENT
Communication is mostly clear, short and simple — both inside and towards the outside. New ideas are shared with the outside as much and as quickly as possible, to get feedback. Communication to customers is focused and bold, to validate assumptions.
CAREFUL
Communication is very carefully planned. Towards the outside, there is often a specialised department supervising it. Product information is normally kept secret, to keep competitors away. Internal communication is written with generalist terms so that it applies to all stakeholders, and sometimes has an internal political agenda.
MistakesFAIL FAST
“Fail fast” has become almost a mantra among entrepreneurs. They normally pivot their business model several times, so it’s good to test assumptions, and to have them fail as soon as possible. They take risks and learn from the experience. This makes them more likely to succeed at radical innovation.
AVOID
There is so much at stake for them, that they can’t allow themselves to fail. Plans are made to minimise the chances of any mistake hitting the market. Employees have areas of expertise, in which they’re expected to have the right answers. Risk are detected and managed. This makes them good at incremental innovation, but generally not at radical innovation.

Of course, this doesn’t apply to all startups or to all corporations. Each company is different! But in our experience organising corporate accelerator programs with Nestholma, we have seen a lot of them behave like this.

What’s your experience? Leave us a comment below!

Posted by & filed under Customers, Funding, Product development, Startups.

4 out of 10 first-time entrepreneurs fail because they forget one of the basics: following their revenues and expenditure – cash flow. In established companies balance sheets and income statements are king, but for startups, it is all about following the numbers in their account: money coming in and out. It sounds very simple (and it is!), but still, I have seen way too many startups to fail because of it.

Here are the 3 common reasons this happens:

 

  1. Not checking your revenues & expenditure often enough

Looking at your finances is a tedious task. It’s quite boring, and you already have so many other important things to do. And let’s be honest: only a few of us are excited to look at the row of minus’, which is usually the case at the beginning of the startup journey. Thus we often decide to do it “tomorrow”. And more often than not, the startups notice the warning sign too late.

  1. Being too optimistic

You need to have a bit of crazy optimism when you are an entrepreneur, but not when you are estimating things like your expenses, funding needs and time x, y and z will take. Startups tend to make their estimates only a small portion of what they really are, which makes them very ill-prepared.

But why that happens? It is partly being overly optimistic & part not understanding how startups work. Things rarely work out how and when you want them to, and there are many variables you just can’t predict. The market, competition, and even the customers’ needs will change. As time goes by, you will also start to understand your customers better. All this means you will have to make adjustments to achieve better product-market fit. Startups usually pivot, i.e. change from plan A to plan B (or even to plan Z!) 3-5 times at the beginning. All this take time and money and push the time of your first sale forward. But expenses still start from day one.

That is why it is important to constantly check your cash flow and be realistic about the ‘whens’ and ‘how muchs’. When you do that, you know when you are going to be out of money and still have time to do something about it. It takes 3-6 months to get funding, investments, etc. so I can’t stress enough how important it is to knowing when you are out of money early enough. Too many startups come up to me less than a week before they were out of money and still believed they would magically make it. You can guess what really happened.

  1. Not understanding when the money is actually coming to your account

For some reason, many startups believe that when they sign a deal, their money-related problems will fly out of the window. But that is not how it works. It might take weeks, months if not even years before the money is actually in your account! It all depends on what you agreed. Also, not everyone pays their bills in time. Trust me, it happens more often that you’d think. There also might be other problems delaying payments like dealing with reclamations. But again: your expenses won’t wait. So remember: even though money is coming in, sooner or later, you might be out of money and bankrupt well before that! Ask yourself: when exactly we will get the money, and will we survive till then.

In my next post, I will give you more concrete tips on how to get your time frames and expense estimates close to reality.

 

Related post: 7 tips on how to ace your startup finances – cash-flow management

 

Posted by & filed under General, Press release, Startups, Ultrahack.

We love Ultrahack! In fact so much that invested into Ultrahack and welcomed it to our Nestholma family! Now we can both offer our partners and communities new ways to innovate through a complementary offering of hackathons and accelerators.

Ultrahack is a global innovation platform for hackers with varying backgrounds and corporations that want to innovate fast. Their active community and tournaments attract an incredible amount of talented people, who are ready to roll up their sleeves. And when these great minds work together in such an unique environment as the tournaments, the results are also amazing!

While solving the challenges the Ultrahack participants, go through an intensive learning curve. While solving real-life problems, they learn and create seeds for new innovations and opportunities. That used to be the end, but now we are excited to offer those budding startups a way to take their work to a whole new level. It is an innovation pipeline like never seen before!

“Ultrahack is the world’s best hackathon! We could not be more excited to get to work with the Ultrahack community and the partner companies,” says Topi Järvinen.

Now that we have joined forces with Ultrahack, we can also offer our customers a new kind of hackathon that complements our accelerator programs. This makes our offering to startups and corporations better than ever. This year we will also offer 1 million euros worth of investments to promising Ultrahack teams. This kind of cooperation is something completely new in the hackathon world! We are excited, and we hope you are too!

 

Posted by & filed under Customers, Funding, General, Programs, Startups.

This is a guest post by Maarit Cimolonskas from Feelingstream

Feelingstream is one of our portfolio startups (feelingstream.com). FeelingStream helps large service companies improve customer experience by analyzing customer messages and providing actionable insight on customer feelings using smart analytics. They participated in the first Nordea and Nestholma Startup Accelerator batch. Applications for the next batch is open: apply and read more.

Antti / Nestholma

You have a great idea, so you start it up.  Every founder knows that it’s hard to launch a successful startup. We’ve all heard stories about both startups who fail and startuppers who do it for networking. The truth is that turning a great idea into a profitable business is a difficult journey! Joining an accelerator might help you here and we wanted to put down some of the lessons we believe are relevant to do it.

Accelerator supports your startup

Accelerator supports your startup

You want to start real business and accelerator advances your doings.

At the same time it equals a lot of work. It might happen that startups wait of being changed better after they join an accelerator. What actually happens is that they are given a better hook to catch a bigger fish!

Intense experience brings accelerated knowledge.

Be prepared that the way you think about the problem you solve may change more than once. The time you spent at the accelerator may come as being too overwhelming and intense at the same time. What it actually brings with is that you get faster answers about the business problem and clearer view about actual business impact.

Take the courage and start creating raving fans as soon as you can.

Profitable business means speaking to actual customers. To start relationships with your customers, you need to get close to their stories. And you need to listen what they have to say. It of course depends on the field you’re in, but the accelerator might as well serve as the gateway to your future customers.

 Accelerator should create as much value as you create value for customers.

Instead of choosing one that brings you more monetary value, go for the one that helps you get closer to your potential customer. Accelerators connected to certain fields bring you actual people with real cases. The sooner you get to know your customer, the better.

Know what you’re missing or where you need to improve. 

Even if your mind acts like sponge for knowledge, it’s good to understand that opinions are different and that in the end, it’s your startup that you want to turn into a business. Mentors are useful only if you know what you need their input for.

Develop and help others develop.

You’re in it together with the teams a lot like you and completely different at the same time.  You’re lucky to have other talented minds around you. They want to help you and giving feedback to other teams might just show you some advancement too.

These are our feelings after participating at the Nordea Nestholma Startup Accelerator. An intense time but what a ride!

Good luck and feel on!

Terje from Feelingstream

Every break is valuable!

– Maarit, Feelingstream

Read more about Feelingstrem at feelingstream.com

Applications for the next Nordea Startup Accelerator batch is open: apply and read more.

Posted by & filed under Customer development, Customers, General, Product development, Startups.

Your startup can only succeed if it can provide real value for your customers. Stop guessing what are your customers’ problems or needs and what they consider valuable. Here’s a framework to help you to really listen to your customer and learn what are the problems your product should solve.

Steve Jobs famously said, “A lot of times, people don’t know what they want until you show it to them.” It’s true that

your customers usually don’t know what is the solution or product they need, but they can tell you what is their problem. Tweet this

Let your customer tell you what is the problem. Don't guess.Take a look at the person missing the bus in the image. What is the product or solution he needs? An alarm clock, timetable app, marriage counseling or what? We can guess, but he can probably tell us in detail what are the problems that make him miss his bus. In other words, just talk with your customer. Once you understand the problems and needs, then it’s your job to be the visionary entrepreneur that comes up with the ingenious solution that the customer could have never envisioned.

If you make sure that you are developing products that someone actually needs, you will eliminate one the biggest reason for which startups fail. But every time we tell our startups to – as Steve Blank says – get out of the building and talk with the customers, they say that it’s hard to do. Based on our experience on working with hundreds of entrepreneurs, we’ve come up with a framework for the customer interviews. Use these five areas as your checklist for discussion topics when you are validating the customers’ problems:

  1. Needs and problems that your customers have
  2. Context for the problems
  3. Substitutes for solving the problems
  4. Value of the problems (time, money etc.)
  5. Other people that have the same problem

 

Download exclusive content: Free summary of the interview tips you can use as a checklist when talking with customers

Get the Interview Tips pdf

What is the most important question to ask from a customer?

My life's work remembered by my Mom (copyright Topi Jarvinen)As Rob Fitzpatrick said in his excellent book “The Mom Test” never ask for opinions from your customers. Ask for specific things that they know about – how they are currently doing things or have done in the past. These are things they know about, and most people like to talk about themselves.

Never try to sell your idea to your potential customers and get them to agree with you when you’re still learning about the problem. It’s really hard to get any reliable information this way, because they probably just don’t want to hurt your feelings. Just like talking to your Mom, right?

When talking with the customers, always let them to do the talking. Your job is to listen and learn. Never ask yes or no questions. Instead ask open questions that let them to describe the problems in their own words and tell you things you’ve never thought of.

The perfect question in most situations is

“Interesting, can you tell me more about it?” Tweet this

Here are some more examples of the kinds of questions we’ve found to be effective customer interviews.

Ask the customer to tell you what are their problems

A large part of business is focused on solving problems—real problems for real people. Grasp the real nature of the problem, and it can be simple to solve. You can do so by asking a few simple questions:

  • What are the difficulties you are experiencing?
  • What is the problem with [x]?
  • How often do you have this problem?

When you start talking with people, you have to teach yourself to hear the important message in their problem statements.   Try to understand:

  • What problems does the customer want us to solve?
  • What is the customer behavior or preferences today?

Remember that it’s not always the most visible and biggest problem that you must solve for your customer. In fact, all the seemingly smaller problems can lead you to areas that specific enough for you to solve. Listen to your customers carefully.

Understand the context in which problems occur

To do this you need to see customer feedback that spans beyond the basic.  You need to understand the context in which the problems occur. Questions such as these can help grow your product and your relationship with your customers.

  • Are there certain things that happen before or after the problem occurs?
  • Does the problem happen often or does it take a long time?

These should help you to understand if there are specific circumstances when the problem occurs. Also, your potential customers may have some real or self-inflicted limitations: common examples are be laws or industry regulations, language, personal preferences etc.

Try to understand how people are solving the problems today

The simplest way to place yourself ahead of the competition is by understanding customers’ needs and problems as well as by understanding what is your competition.  And your competition is not always another company. You may be also looking to improve upon an existing habit, custom or use of a product.

For example, an Indian entrepreneur just invented “edible spoons”. They work perfectly fine as spoons, and you can eat them with the food. The problem with conventional spoons was that they were a big hassle when it came to packing. He needed a substitute solution.

If there’s a real problem, people probably are doing something or using something to solve the problem already. Try to understand this by asking:

  • How do you solve this problem?
  • Is there current way good enough?
  • Do you wish there was something else available?

Then used this feedback to start to think about:

  • Who are the real competitors?
  • What are the current products not doing right?

Determine the value of your product based on their current and past actions and experiences

Nine out of ten startups fail. Most of these failures are not because of insufficient capital or poor marketing, but because they were selling something that nobody wanted to buy.

According to Fortune, most startups fail because “they make products no one wants”.  The solution to this is to focus on what your customers consider valuable. After all,

customer will pay for the value you provide, not for your vision. Tweet this

Asking your potential customer “how much would you pay for this” is not a good way to determine the value. How would they know? You’re asking them to predict the future. Instead ask about things they know about:

  • How much do you currently spend on a product for this type of need?
  • Is it a big problem for you?
  • How much time or money you waste because of this problem?

Remember, not every problem is worth solving with a new product. Sometimes the time savings, cost efficiency, new revenue opportunity, enjoyment or some other benefit of the new solution just doesn’t provide enough value to make your new product interesting. You need to understand this before you waste your time and money on a product no-one wants.

Ultimately, you need to reflect on the answers to your potential customers’ questions by asking yourself:

  • How do my customers spend money in these types of situations?
  • How do my customers spend money for similar needs?
  • What do my customers see as valuable?
  • Is it a real problem or just a small annoyance?

Meet other people—never assume everyone has the same problem

Make sure your startup is offering solution for a problem faced by a sufficiently large number of people. Simply ask your prospective customers, “Does someone else have this same problem?  Would you please introduce me to her?”

Never start building something if it doesn’t have a big enough market. And you have to figure out what is big enough for you. Usually, the best bet is to aim to dominate a niche market and grow from there, as Silicon Valley VC Peter Thiel said in his excellent book Zero to One. Just make sure that there is a market where you can provide enough value.

Make talking with customers your everyday habit

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The bottom line is very simple.  Talking with customers before developing new products will help you to build something that actually provides value that they are willing to pay for.  When you understand what is the problem that needs to be solved, you’re well on your way to becoming a successful startup.

And don’t stop there! You need to talk to your customers all the time – even when you’re running a billion-dollar business. As entrepreneur and VC Mark Cuban said:

It is so much easier to be nice, to be respectful, to put yourself in your customers’ shoes and try to understand how you might help them before they ask for help, than it is to try to mend a broken customer relationship

Topi Järvinen @topij

 

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